Exclusivity Agreements in Commercial Leases

At the risk of attempting to sound like a salty veteran, I’ve reviewed a number of commercial lease agreements in my day. While I do my best to control my instincts that turn me into an overprotective mama bear for my clients (usually the tenants), sometimes I just have to stomp my feet and say NO, you’re NOT signing that. Now go to your room. I mean…ahem…nevermind.

Last week a client presented me with an Exclusivity Agreement she received from her prospective landlord. My client wanted to open a nail and skin care salon in a shopping center that already had a hair salon as a tenant. In short, the exclusivity agreement between the landlord and the existing tenant said that the landlord could not lease to another tenant whose “primary business was hair and skin care.” Moreover, the agreement provided that if the landlord breached this exclusivity by renting to someone with that kind of business, that someone, the NEW TENANT, would have to pay the EXISTING TENANT’S legal fees in suing the landlord. While I explained that such a clause might not be enforceable against the new tenant, her business was close enough to the existing business to be worrisome and, without a release from the existing tenant, I advised my client to find somewhere else to rent.

Then I lost sleep thinking of all the businesses out there who took one look at the size of their commercial lease agreements (usually between 50 and 100 pages) and said “screw it, I’ll just sign it” without reading the fine print that ends up getting them into trouble. Unfortunately, this same client had had trouble years ago because she signed a personal guarantee without realizing it.